Garmin 2008 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2008 Garmin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

66
Accounting for Stock-Based Compensation
The Company currently sponsors three stock based employee compensation plans. On January 1, 2006, the
Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment,
which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) requires the
measurement and recognition of compensation expenses for all share-based payment awards made to employees and
directors including employee stock options and restricted stock based on estimated fair values. SFAS No. 123(R)
supersedes the Company’s previous accounting under Accounting Principles Board (“APB”) Opinion No. 25,
Accounting for Stock Issued to Employees, for periods beginning in fiscal 2006. See Note 9.
The Company adopted SFAS No. 123(R) using the modified prospective method. Under the modified
prospective method, compensation costs are recognized beginning with the effective date based on the requirements
of SFAS No. 123(R) for all share-based payments granted after the effective date and based on the requirements of
SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain
unvested on the effective date. The Company’s consolidated financial statements as of and for fiscal years ended
December 27, 2008, December 29, 2007, and December 30, 2006 reflect the impact of SFAS No. 123(R).
SFAS No. 123(R) requires companies to estimate the fair value of share-based payment awards on the date
of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is
recognized as stock-based compensation expenses over the requisite service period in the Company’s consolidated
financial statements.
As stock-based compensation expenses recognized in the accompanying consolidated statement of income
for the fiscal years ended December 27, 2008, December 29, 2007 and December 30, 2006 are based on awards
ultimately expected to vest, they have been reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
those estimates. Forfeitures were estimated based on historical experience and management’s estimates.
Recently Issued Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value
Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value in GAAP, and
expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements
that require or permit fair value measurements. This statement is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company adopted SFAS No. 157 effective
December 30, 2007 and the adoption did not have a material impact on the Company’s financial condition or
operating results.
SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (exit price). SFAS No. 157
classifies the inputs used to measure fair value into the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets or liability
Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar assets
Level 3 Unobservable inputs for the asset or liability
The Company endeavors to utilize the best available information in measuring fair value. Financial assets
and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement.